One of the advantages of a Limited Liability Company is its flexibility in how it is taxed, as a sole proprietorship, a partnership or a corporation. That flexibility extends to the state level, as Wisconsin requires filing of different forms to reflect the tax status an LLC choose for its federal return. By default, taxes on LLCs are passed through to its members, as owners are called for such companies.
Single-member LLCs are by default treated by the U.S. Internal Revenue Service as a "disregarded entity" and taxed as a sole proprietorship. The LLC member reports profit and loss details on Schedule C in his federal return, and reports the results on Form 1040. Any net profit is subject to self-employment tax as well as income tax. Wisconsin follows the IRS lead for LLCs treated as a disregarded entity and treats it that way as well, requiring the member to include the income and expenses on the member's return.
Read More: Going From Multi Member LLC to Single Member LLC
LLCs Taxed as Partnerships
Multi-member LLCs are by default treated by the IRS as partnerships, and will need to file Form 1065, U.S. Return of Partnership Income, filed by the managing member or elected manager of the company. All members need to report their pro-rata shares of income, credits and deductions on Schedule K-1 (1065) Partner's Share of Income on each individual's personal return. Wisconsin LLCs treated as partnerships must file Form 3 Wisconsin Partnership Return, signed by a general partner.
LLCs Taxed as Corporations
LLCs can choose to be taxed as a corporation by filing federal Form 8532 to elect its business entity classification. The LLC electing to be taxed as a C corporation must file Form 1120 U.S. corporation Income Tax Return. With this form, income is reported and taxed on the corporate level, and any distribution of profits to members are subject to income tax. If the LLC chooses to be taxed as an S Corporation, it files Form 1120S, and each member reports pro-rata share of income on Schedule K-1 (Form 1120). Wisconsin allows LLCs to make the same election by attaching a copy of the federal election statement to Form 3 and filing it with the Department of Revenue for the year of the election. LLCs treated for federal tax purposes as a corporation must file a Wisconsin corporation franchise or income tax return, Form 4 or 5.
Other Wisconsin Taxes
LLCs may be subject to sales, use and withholding taxes. Any Wisconsin partnership, including LLCs treated as a partnership, that has gross receipts of $4 million or more is also subject to a state recycling surcharge.
Tom Chmielewski is a longtime journalist with experience in newspapers, magazines, books, e-books and the Internet. With his company TEC Publishing, he has published magazines and an award-winning multimedia e-book, "Celebration at the Sarayi." Chmielewski's design skills include expertise in Adobe Creative Suite's InDesign and Photoshop. He holds a Bachelor of Arts in English from Western Michigan University.